The year 2022 is just by the corner and I know that you are excited about the incoming year. In periods like this that lead into a new year, humans around the world are known to be involved in several activities. One of such is the new year’s resolutions.
Different people have different plans for the new year. But in most cases, people wish to be financially better than they were in the previous year. This usually tops the list of many people’s new year resolutions.
It is therefore important to understand that for you to be in a better financial position in the year 2022, you need more than mere wishful thinking. It requires conscious and intentional efforts. As a matter of fact, it is necessary for you to get your finances in order in the incoming year of 2022. Failure to do so may affect your financial growth irrespective of the numerous resources that may be available to you.
The recent covid-19 pandemic has affected virtually every aspect of human existence and is visible in the global economy. People have therefore been coming up with ideas to survive the current realities that have threatened the livelihood of global citizens.
Why do you need to get your finances in order for 2022?
i. It helps you to stay focused on the goal
I am sure that you have a huge dream for the incoming year. One of the smartest ways to achieve that dream or goal is to have your finances in order.
As you set your long and short-term goals, you need to keep your eyes on the prize. Do not lose focus. Do you have plans to buy that car of your dream, the house you envisioned yourself in, that trip you have been fantasizing about, or that big investment/start-up that you are working on? You can achieve that! But you need not be distracted.
If you get carried away by every nice-looking thing that you come across, your goal may suffer.
ii. It stops you from spending money you don’t have.
No thanks to credit cards, lots of people are guilty of spending money they do not have. In the year 2020 alone, the average debt on credit cards per American household was as high as $6,194.
Before the age of credit cards, people were more conscious about their spending. Since they dealt with raw cash, it was easy for them to notice if they are going beyond their means or not. But today, credit cards have thrown people into serious debts because they refused to track their expenses.
However, getting your finance in order in the year 2022 will save you the embarrassment of such poor financial decisions.
iii. It leads to a happier retirement.
No matter how young you are, retirement is by the corner- it’s only a matter of time. What then are your plans towards the inevitable?
Part of having your finance in order in the new year is taking your 401 (k) savings seriously. It may not be convenient at the moment, but it is going to be worth it in the long run. After all, it is you that will still spend the money. So, why not save it for when you need it the most? You don’t want to spend your last years on earth old, poor, and depressed because you decided to be reckless when you were younger.
Imagine spending your retirement golfing, sun-bathing at the beach and going on vacations to places of your choice around the world.
iv. It prepares you for emergencies.
As humans, emergencies are part of the realities of our existence. How then are you planning for such experiences, since they happen without notice?
When you get your finance right, emergencies don’t frighten you. This is so because you rest assured of your backup plans.
Aside from saving for emergencies, you also need to take your insurance seriously. All these would be worth it in the long run.
v. You sleep better.
More often than not, people are losing sleep over their finances. And this is not good for their physical and mental wellbeing. But having everything in place is a great hack to beat insomnia.
When you get your finances right, you are more relaxed, fall asleep easily and healthier to make more money. After all, health is wealth.
Now that we have identified the benefits of getting your finances in order in the year 2022, it is also important to identify what to do to achieve such a crucial goal, as well as how to go about achieving the same.
Tips to get your finances in order for 2022
1. Read books on Personal Finance
Knowledge, they say is power. If you need to get your finances right in the year 2022, you need expert opinions on finances. These are easily accessible in the books they publish.
When you read financial books and work by the instructions therein, you learn what to do and what not to do to build a more financially sustainable future for yourself. From how to live a debt-free life, to advice on investments and savings, as well as other money management angles.
Interestingly, there are several options to these books. You can get used books at cheaper rates, borrow from your local library, read the posts of professionals online, as well as listen to their audiobooks.
2. Start budgeting now
The best time to start budgeting was yesterday. The second-best time is now. You do not have to wait till the new year before you start planning your finances. You can start now.
Have your expenses written down, compare them with your income, device a pattern that inculcates your expenses, allows you to save and invest from your earnings and stick to it.
More preferably, have a budgeting app. This will make budging for you seamless and have your finances adequately planned electronically.
Budgeting should be continuous. Practice it weekly, monthly, annually, always.
3. Cut your monthly expenditures
This is what budgeting does. It helps you to identify those expenses that you can do with, but are gulping a significant percentage of your income.
When you review your monthly expenses, you are likely to figure out some expenses to strike out. If you don’t spend much time at home/in front of the TV for example, won’t you consider canceling your cable subscription that is a recurring expense, yet you do not get value for it?
There are also alternatives like Netflix and other streaming options at your disposal with equal, if not better satisfaction.
4. Stop/reduce eating out
If you want to be on the top of your finances in the year 2022, you need to reduce the frequency of your eat-outs; that is if you can’t stop entirely.
There is nothing wrong with eating in fancy restaurants once in a while, but constantly doing that may not be favorable to your pockets.
You can start by reducing the frequency at which you visit those restaurants and gradually stop it.
Try eating homemade meals. They are cheaper and healthier.
5. Clear your debts
There is nothing decent about piling loans with no plans of paying them off. Getting your finances right requires that you become responsible and one of such is living a debt-free life.
It is not wrong to borrow money. It is wrong to not pay.
Start by itemizing your loans. Prioritize those with high-interest rates. If you must borrow, negotiate for low-interest rates. Also, remember that your ability to negotiate favorable loan terms depends on your credit score. And your credit score depends on your response to previous loan performance(s).
6. Ditch your credit cards
If you are always struggling with your finance on a monthly basis, as you go into 2022, you may want to consider putting your credit cards away.
As earlier identified, so many people are in a financial mess because of their reckless attitude towards credit cards, if you fall into this category, 2022 may be the year for you to re-strategize and ditch the use of credit cards.
Doing this helps you to manage your finance more as you only spend what you have.
Overdependence on credit cards is a symptom of possible bankruptcy. Instead of credit cards, you may opt for cash or debit cards. This will help you to be more in control of your finances in the incoming year.
7. Don’t ignore your student loans
If you are not proactive about paying off your student loans, it is capable of messing your financial plans up.
Student loans are one of the major loans that Americans struggle with and the ability to manage them is a step in the right direction. Therefore, you need to work out a plan to get it cleared.
You can also check if you are eligible for any of the student loan forgiveness programs. This is capable of freeing you of the repayment burden- either in part or as a whole.
8. Start saving on a regular basis
Just as investing is important, saving is necessary too. You can grow passive wealth through it. If you cut down on your cable subscription, for example, it is not for you to transfer the money to another expense. Rather, it is for you to put them in a savings account that you rarely touch.
Savings should not be an afterthought and should be done at regular periods of the week, month or year. Also, do not save what’s left after spending, spend what’s left after saving.
9. Embark on a spending fast Journey
This is another tip to help you be in charge of your finance. To go on a spending fast is to decide not to involve in a spending spree.
Limit your expenses for a while to essentials like feeding, transportation, rent and other important recurring bills and see how your finance will improve.
For a couple of months, adapt to the lifestyle of a minimalist. Prioritize your needs, and do away with wants that you do without. After that period, evaluate the outcome in your finance. Who knows, you may see yourself eventually sticking to that pattern.
10. Set realistic goals
While it is great to set goals, it is greater to make sure that they are realistic goals. Do not build castles in the air all in the name of setting goals.
Make sure these goals are within your reach and affordability. Do not set a $100,000 goal on a $60,000 annual income. That would be you putting more burden on yourself.
The plan is to handle your finance in a way that you attain financial freedom and not put yourself in bondage in the process.
Investing is one of the best ways to build wealth. While you actively work on a 9-5 or run your business, you can earn passive income from your investments. This way, you earn money even while asleep as your money works for you.
No matter how loyal and hardworking people are when you employ them, they get tired, go on holiday and retire. But if you employ your money, all it does is return profits to you. It does not get tired of working, doesn’t take breaks, and sure doesn’t retire. Those are what investments do. Isn’t that awesome?!
Nevertheless, it is always advisable to do your own research, speak to a trusted and qualified financial advisor or an experienced family member or friend that you can trust. It this important to make sure that you don’t put your money into an investment because everybody says so.
Do your due diligence, so you don’t literarily set your money on fire.
12. Improve on your job skills
The world is fast-changing and it is only those that change with it that wouldn’t be left behind. As you work actively or run your business, stay informed, stay trending. Improve your skills to remain relevant.
If you are stuck in the archaic ways of executing your jobs, you risk becoming redundant, irrelevant to your company and likely to be shown the way out. As a result, invest in your personal development. Hone your skills to what is currently required in your industry.
Aside from keeping you at the job, this tip can also win you a better offer both within and outside your organization; and this can translate to better earning opportunities for you.